A Colorado Guide to Financial Assurance
In 2019, the Colorado legislature passed Senate Bill 181. This new law changed the mission of the Colorado oil and gas regulators (otherwise known as the COGCC). Now, the state must protect public health and safety above industry profits.
Last year, the COGCC made huge strides in completing the “mission change” rule making. Now, they’re working to enact new protections for our health, safety, and environment. These protections are the 2021 “financial assurance rulemaking.”
What is Financial Assurance?
We’re glad you asked.
Think of it this way: when someone rents a house or an apartment, they sign a lease and pay a deposit to cover any damages. “Financial assurance” is what we call the deposit that oil and gas companies pay before they drill.
That makes sense. So, why this rulemaking?
Right now, the oil and gas industry doesn’t pay its fair share. The COGCC tells us that the average cost to clean up an oil or gas well is about $92,000. Right now, though, industry pays $10,000 to $20,000 per well to drill, far less than the cost to clean up their messes.
What’s so bad about these wells, anyways?
Oil and gas is a dangerous business and our regulations have not kept pace with development. This dangerous lag leaves our communities and environment to bear the consequences.
For decades, the oil and gas industry has shown that they value profits over people. They have abandoned wells close to our communities, threatening our health and safety. And all the while, their emissions have hurt our climate, clean air, lands, waters, and wildlife.
The bottom line is that industry has a track record of making a mess and leaving Coloradans to clean it up.
What’s the solution?
When it comes to oil and gas, Coloradans’ health and safety, and our environment should always come first. Right now, our state leaders have the opportunity to protect our communities. They have the power to stop this problem in its tracks.
Strong new rules can protect our climate and health. These new rules should lead to the plugging, abandoning, and reclaiming of oil and gas wells. They should also improve conditions for Colorado’s lands and wildlife.
They can do this by:
- Establishing rules that protect our health and safety, improve our air quality, lands, waters, and wildlife habitat
- Requiring the oil and gas industry to provide the full cost to clean up their wells and locations
- Directing the closure and clean up of wells that produce marginal amounts of oil or gas. These wells have major impacts to our health and safety that outweigh the minimal profits they generate.
- Raising industry money to build an oil and gas well clean-up or orphan well fund managed by the state of Colorado
“Financial assurance” rules work together to clean up the messes the oil and gas industry leaves behind. They collect oil and gas industry money to make sure industry cleans up after itself, not everyday Coloradans.
These new rules should ensure the timely and proper plugging, abandoning, and reclaiming of oil and gas wells. Doing so will reduce climate change-causing emissions and improve our air, lands, water, and wildlife. Most of all, they should ensure that the industry is paying its fair share to clean up its messes.